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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

Maritime Infrastructure Holding Back Indonesia Growth

Analysts claim Indonesia’s economy is being held back by its maritime trade facilitation failures. Consisting of more than 17,000 islands, the Indonesian archipelago should lend itself to shipping and maritime trade, but the total amount of goods moved by sea currently accounts for only 4% of the total freight transported in Indonesia, according to a recent study by the Indonesian Infrastructure Initiative.

A new study by McKinsey & Company found that to improve its performance, Indonesia urgently needed to increase domestic port productivity, which lags some 50% behind international terminals, and boost the reliability of domestic shipping services. “The unpredictability and high costs of sea transportation is a major reason why key industries still rely heavily on road transportation, even when transporting goods over long distances, such as from Sumatra to Java,” said McKinsey, as reported in the Jakarta Post.

“On this journey, it can take anywhere between nine to 25 days by sea. The equivalent journey by road is more predictable and takes four to five days maximum.”

“When sea transportation is unavoidable, firms need to maintain excess inventory of inputs, for example, raw materials, in order to meet demand for the goods they sell. This largely contributes to the country’s huge logistics costs.”

“Ships wait an average of three days before entering Jakarta’s domestic terminals, and up to 15 days during Lebaran [the Idul Fitri holiday], due to berth congestion and vessels waiting for late cargoes.”

As well as investing in domestic port efficiency at the terminal in the form of better equipment and management systems, ships that miss scheduled slots should be fined to help reduce waiting times, while dwell times of cargo at port should be slashed to minimize terminal congestion.

“Indonesia could target Malaysia’s current performance of three days, by accelerating the pre-customs process through enforcing online document submission, for example through the National Single Window (INSW) for import documents, and the Transportation Ministry’s Inaportnet platform for manifests and business transactions,” said McKinsey.

“Another part of this is harmonizing priority levels among government agencies on shipping cargoes and focusing on set targets to bring down delays.

“Finally, imposing penalties on delays could provide the incentive structure to discourage storing cargoes at ports.”